Cost Estimating Techniques for Casting Products

B.Tech. Project Report

Submitted in partial fulfilment of the

Requirements for the award of B.Tech Degree

By

Manoj Kumar Meena

(02D10044)

Under the Guidance of

Prof. S. D. JOG

DEPARTMENT OF MECHANICAL ENGINEERING

INDIAN INSTITUTE OF TECHNOLOGY, BOMBAY
May 2010

0
 Approval Certificate

Department of Mechanical Engineering

Indian Institute of Technology, Bombay
Powai, Mumbai-76

The B.Tech Project report titled Cost Estimating Techniques for Casting Products
submitted by Manoj Kumar Meena (Roll no. 02D10044) was done under my supervision
and may be accepted for evaluation.

Date: 6th May, 2010 Prof. S. D. Jog

(Project Supervisor)

Prof. ... ... ... ... .... ... ... ... ...
Examiner

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 Acknowledgement

I would like to express my sincere gratitude to Prof. S. D. Jog for his guidance and support
given to me to complete this project without which this effort would have lacked direction. I
also like to thanks my faculty advisor Prof. P. S. Gandhi who always encourages me to
finish my degree requirements. I also thank to my friends Prashant, Satish and Mayank
without their support I would not have been able to finish my degree.

Date: 6th May, 2010 Manoj Kumar Meena

(02D10044)

2
 Declaration

I declare that this written submission represents my ideas in my own words and where others
ideas or words have been included. I have adequately cited and referenced the original
sources. I also declare that I have adhered to all principles of academic honesty and integrity
and have not misrepresented or fabricated or falsified any idea/data/fact in my submission. I
understand that any violation of the above will be cause for disciplinary action by the
Institute and can also evoke penal action from the sources which have thus not been properly
cited or from whom proper permission has not been taken when needed.

Date: 6th May 2010 _____________________

Manoj K. Meena
(02D10044)

3
 Abstract

Casting is a major manufacturing process. Estimating manufacturing cost at design stage is

very important in todays market of intense competition. For the designers if the product
manufacturing cost can be estimated during the design stage, they can modify a design to
achieve proper functionality as a reasonable cost at early stage. Early cost estimation also
serves as a decision making tool for the designer when a choice is to be made from range of
alternatives. Quotation in the field casting is a highly complicated task. The simple cause of
this is that one must estimate the manufacturing time and cost, with unknown tool
construction and complexity. The objective of this project is to study existing technologies for
early cost estimation for casting product. This permits calculation of realistic manufacturing
cost and time in advance, based on the local design and manufacturing environment.

Keyword: casting cost, cost estimation techniques, manufacturing process planning

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 Table of Contents
Approval Certificate...................................................................................................................1
Acknowledgement......................................................................................................................2
Declaration.................................................................................................................................3
Abstract......................................................................................................................................4
List of Table and Figures............................................................................................................7
Chapter 1 : Casting Brief Introduction
1.1 Major Casting Process....................................................................................................8
1.1.1 Sand Casting...................................................................................................................8
1.1.2 Centrifugal
Casting.........................................................................................................9
1.1.3 Investment Casting.......................................................................................................10
1.1.4 Die Casting ..................................................................................................................10
1.1.5 Others ..........................................................................................................................11
1.2 Comparison of Casting Methods.................................................................................11
1.3 Process Flow Diagram for Sand Casting......................................................................12
1.4 Machining Process.......................................................................................................13
1.4.1 List of Operation..........................................................................................................13
Chapter 2 : Problem Definition
2.1 Components of Cost Estimation...................................................................................16
2.2 Motivation....................................................................................................................17
2.3 Report Organization.....................................................................................................18
Chapter 3 : Cost Estimation Methods
3.1 Classification of Cost Estimation Methods..................................................................19
3.1.1 Overview of Qualitative And Quantitative Estimation Methods.................................20
3.2 Intuitive Estimation Methods.......................................................................................20
3.2.1 Case-Based Cost Estimation Method...........................................................................21
3.2.2 Rule-Based Cost Estimation System............................................................................23
3.3 Analogical Cost Estimation Techniques......................................................................24
3.3.1 Regression Analysis Models........................................................................................24
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3.3.2 Neural-Network Based Cost Estimation Method.........................................................26
3.4 Parametric Cost Estimation Method.............................................................................27
3.5 Analytical Cost Estimation Methods............................................................................27
3.5.1 Operation-Based Approach..........................................................................................27
3.5.2 Breakdown Approach...................................................................................................28
3.5.3 Tolerance-Based Cost Models......................................................................................28
3.5.4 Feature-Based Cost Estimation....................................................................................29
3.5.5 Activity Based Cost (ABC) Estimation Method.........................................................34
Chapter 4 : Concluding Remarks
Bibliography.............................................................................................................................35

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 List of Table and Figures

List of Figures

Figure 1: Typical Components of a Two-part Sand Casting Mold............................................9

Figure 2: Centrifugal Casting.....................................................................................................9
Figure 3: Schematic view of a high pressure die castings........................................................10
Figure 4: Schematic view of a low pressure die castings.........................................................11
Figure 5: Process flow diagram for sand casting.....................................................................12
Figure 6: Machining operation for die cast products...............................................................13
Figure 7: Freiman Curve..........................................................................................................15
Figure 8: Relationship between elements of cost and components of cost..............................17
Figure 9: Classification of cost estimation methods................................................................19
Figure 10: Flow diagram of the case-based approach for cost estimation...............................21
Figure 11: Cost estimation process model based on user constraints......................................23
Figure 12: Breakdown of total production cost........................................................................28
Figure 13: Framework of the cost estimation system by Lin and Ou-Yan..............................31

List of Tables

Table 1: Comparison of casting methods.................................................................................11

Table 2: Comparison of casting methods.................................................................................12
Table 3: Metal (Aluminium) pattern Data................................................................................25
Table 4: Correlation matrix for metal pattern..........................................................................25
Table 5: Summery, output of regression analysis....................................................................25
Table 6: Regression analysis coefficient for metal pattern......................................................26
Table 7: Limits of selected AI methods by Miko and Szantai.................................................30
Table 8: Overhead distribution due to ABC and TCA.............................................................33

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CHAPTER 1

Casting Brief Introduction

Casting is defined as a manufacturing process by which a liquid material is poured into a

mold, and then allowed to solidify. The solidified part is also known as a casting, which is
ejected or broken out of the mold to complete the process. The shape of the object is
determined by the shape of the mold cavity. Casting is most often used for making complex
shapes that would be otherwise difficult or uneconomical to make by other methods.

Casting has following advantages over other manufacturing process [1]

1. Large and heavy metal objects may be cast which are difficult or economically
impossible to produce by other manufacturing process.
2. Products may be cast in a single piece that would otherwise require manufacturing in
several pieces and assembly by other manufacturing process.
3. Because of their physical properties, some metals can only be cast to shape since they
cannot be hot-worked into bars, rods, plates, or other shapes from ingot form as a
preliminary to other manufacturing process.
4. The most complex of shapes, both external and internal may be cast. As a result, many
other operations, such as machining, welding can be minimized or eliminated.
5. Its economical so highly adaptable for mass production. Large numbers of a given
casting may be produced very rapidly compare to other process
6. Few engineering properties can be obtain more precisely in casting than other process,
like merchantability, uniform directional properties, good bearing qualities.

1 Major Casting Process

Some Major casting processes are briefly explained below

Sand Casting
Sand casting is used to make large parts (typically cast iron, bronze, copper, aluminum
alloys). Molten metal is poured into a mold cavity formed out of foundry sand. The cavity in
the sand is formed by using a re-usable pattern (an approximate replica of the desired part),
which are typically made out of wood. Core is inserted into the mold to produce the internal
features of the part such as holes or internal passages. The parting line separates the cope and
drag. The drag is first filled partially with sand and cores, and the gating system are placed
8
near the parting line. The cope is then assembled to the drag, and the sand is poured on the
cope half, covering the pattern, core and the gating system. The sand is compacted by
vibration and mechanical means. Then the cope is removed from the drag, and the pattern is
carefully removed. The object is to remove the pattern without breaking the mold cavity. This
is achieved by designing a draft, a slight angular offset from the vertical to the vertical
surfaces of the pattern. The main steps in sand casting are pattern making, molding, metal
melting, metal pouring, solidification and mold breaking. [2]

Figure 1: Typical Components of a Two-part Sand Casting Mold [2]

1.1.1 Centrifugal Casting

In centrifugal casting, a permanent mold is rotated about its axis at high speeds (300 to 3000
rpm) as the molten metal is poured. The molten metal is centrifugally thrown towards the
inside mold wall, where it solidifies after cooling. The casting is usually a fine grain casting
with a very fine-grained outer diameter, which is resistant to atmospheric corrosion, a typical
situation with pipes.

Figure 2: Centrifugal Casting [2]

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 1.1.2 Investment casting
It is also known as the lost wax process. Complex shapes can be made with high accuracy. In
addition, metals that are hard to machine or fabricate are good candidates for this process. It
can be used to make parts that cannot be produced by normal manufacturing techniques, such
as turbine blades that have complex shapes. The mold is made by making a pattern using wax
or some other material that can be melted away. This wax pattern is dipped in refractory
slurry, which coats the wax pattern and forms a skin. This is dried after this, the entire pattern
is placed in an oven and the wax is melted away. Just before the pour, the mold is pre-heated
to about 1000 C to remove any residues of wax, harden the binder. The pour in the pre-
heated mold also ensures that the mold will fill completely. Pouring can be done using
gravity, pressure or vacuum conditions. This leads to a mold that can be filled with the molten
metal. Parts made with investment castings often do not require any further machining,
because of the close tolerances that can be achieved. [2]

1.1.3 Die casting

Die casting are similar to sand casting. In this instead of using sand as the mold material, a
metal is used as a permanent mold. These molds also known as dies are specially designed to
produce different shapes of varying complexity with a high level of accuracy and
repeatability. Die casting is further sub-categorized among them low pressure die casting,
high pressure die casting and gravity casting are mainly adapted. [3]

a) High pressures die casting: In this process the liquid metal is injected at high speed
and high pressure into a metal mould. The setup consist two vertical plate (one
moveable) on which arrangement is made to hold die halves. The metal is poured into
the shot sleeve and then high pressure is applied using hydraulically-driven piston

Figure 3: Schematic view of a high pressure die castings [3]

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 b) Low Pressure Die Casting: In this process the die is filled from a pressurized
crucible below. Low pressure die casting is suited to the production of components
that are symmetric about an axis of rotation. It produces comparative light weight
products

Figure 4: Schematic view of a low pressure die castings [3]

1.1.4 Others
Casting is further classified in many different sub categories like ceramic mold casting,
plaster mold casting, shell mold casting, gravity die casting, squeeze casting etc. But here its
out of scope of this report to go into further details of each and every process.

2 Comparison of Casting Methods

We cannot define a particular casting process as 'the best' as it completely depends on the
specific need of the application. Hence, one should be careful while selecting the most
appropriate technique(s) that suit the type of castings produced and the operational and non-
operational constraints like time and cost. The following table gives a brief comparison
between above mentioned casting processes [4].

Investment
Sand Casting Die Casting
Casting
Tool costs Low High Average
Unit costs Average Low High
Maximum casting weight over 1 tonne 30 Kg 45 Kg
Thinnest section castable (mm) 2.5 0.8 1.6
Typical dimensional tolerance (mm) 0.3 0.25 0.25
Relative surface finish Fair to good Best Very Good
Relative mechanical properties Good Very good Fair
Relative ease of casting complex design Fair to good Good Best
Relative ease of changing design in
Best Poorest Fair
production
Table 1: Comparison of casting methods [4]

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 Die casting Sand casting Investment Casting
Permanent die(optional) -ve
Permanent Die -ve shape Permanent pattern +ve shape
shape
Temporary pattern +ve shape
Temporary mould -ve shape Temporary mould -ve shape
Final Casting +ve shape Final Casting +ve shape Final Casting +ve shape
Table 2: Comparison of casting methods [4]

3 Process Flow Diagram

The process Flow diagram gives an overall idea and clear picture of the casting process. The
following figure shows the process flow diagram for sand casting process. [5]

Drawing Metal Purchasing

Binders, New sand and additives

Pattern Making Melting

Sand preparation

Core Making

Alloying
Molding and mold assembly

Waste and Disposal Pouring

Slag Disposal
Solidification and cooling

Sand Reclamation Shakeout

Sprues, Gates, Runners
Cleaning fettling

Finishing Scrap

Finished Casting

Figure 5: Process flow diagram for sand casting [5]

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4 Machining process
Although the die casting process is capable of producing net shape components, some parts
still require post-cast machining and finishing. Heat treatment, Tapping of internal threads or
removing draft angles on tightly tolerance bores are some of the common secondary
machining requirements. For complex and special purpose product sometime machining cost
is significant. Thus it is essential to include machining cost at early cost estimation stage.

1.1.5 List of operation

For die cast products the common list of operation of machining is given below.

Figure 6: Machining operation for die cast products

(Source: InspriOn Enng. Pvt. Ltd, Ahamdabad)

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CHAPTER 2

Problem Definition

A casting manufacturing company mainly deals with producing products and assemblies for
customers. In this business manufacturers get inquiries for machined castings and engineering
assemblies which are to be supplied to the customer. The machining and other post casting
process may vary from component to component depending on customers operational
requirements.

In above situation manufacturer work out price of casting from their own experience while
for other post casting process they depend on vendors for getting quotation for the process
they want to outsource. This process is time consuming, and customers want quotation
within very short span of time. As well as the experience based cost estimation method is not
accurate enough. In this situation if manufacturer quote too high price for some product then
he will lose not only the tender but also the potential regular customer. If he quotes too low
then it will be causes of great lose to the manufacturer.

Sometime product designers design components with limited knowledge of manufacturing

process. This may result in unnecessary expensive tooling cost. There should be some criteria
by which manufacturer can select most suitable process from number of available alternative
solutions. These criteria should implement design to cost principles.

For the above problem we are targeting to study all the major cost estimation methodologies
and compare them. And list all the advantages, disadvantages and limitations of each
estimation method.

Product design and development is the most important and crucial stage in the product life
cycle. The lead time, manufacturing cost and quality are the most important parameters in
this decision making process. Quality of product can be controlled in later stage but its
almost impossible to control the cost of product if changes are to be made in the product

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design at the subsequent stages as 80% of the product cost is committed at the product design
stage, although design stage account for only 6-7% of total product development cost [6].

If the product development times are not reduced then it cause delay in bringing the product
to the market resulting loss of profit. For a product to be successful it should be innovative in
design and cost effective.

The relationships between the over-and underestimates and the cost of products can be
represented by the Freiman curve shown in Figure

Figure 7: Freiman Curve [7]

The graph shows that:
The greater the underestimate, the greater the actual expenditure.
The greater the overestimate the greater the actual expenditure.
The most realistic estimate results in the most economical project cost.

Because of this sensitive and crucial role in an organization, cost estimation has been a focal
point for design and operational strategies and a key agenda for managerial policies and
business decisions. As a result, a substantial research effort has been expanded in
exploring design implications, new techniques, and methods for producing accurate and
consistent cost estimates not only to generate optimum design solutions but also to achieve
the maximum customer satisfaction in terms of low-cost, high-quality, and in-time product
delivery.

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5 Components of Cost Estimation
The typical components of the early cost estimation are listed below

1. Design Cost: It is estimated from expected time for the design of that component, this
may be done based on similar jobs previously done, but for new complicated jobs it is
necessary to consult the designer.
2. Drafting cost: It include the time in simulation and modeling to validate the design
and to prepare the engineering drawings needed for production
3. Development and Research cost: It includes cost of development and prototypes.
These cost are difficult to estimated especially for new products and often include in
overhead costs.
4. Material Cost: The cost of material can be estimated from the design by determine
the types, amount and shapes required in production. Material costs include direct and
indirect materials. Direct material cost can be determined from casting weight.
Indirect materials cost depends on process. In sand casting it includes cost of molding
sand, core sand and pattern cost.
5. Labor cost: The cost for labor includes the direct labor time and rate for production.
For activities which are performed in batch, the time per component for these
activities can be calculated based on casting weight, mould weight.
6. Quality Cost: The quality cost includes the cost of inspection, the cost of maintaining
process control charts and costs associated with improving product quality.
7. Energy cost: Casting is a large energy consuming process. The energy required for
melting can be estimated using thermodynamic equation. Energy also required for
mold making which can be assigned based on the weight of casting
8. Tooling cost : the tooling cost include the tool cost, cost of fixtures, cost of sharpening
tools, tool storage cost, cutting tool cost may be include in tooling cost.
9. Overhead Cost: The overhead cost mainly includes machines depreciation overhead,
material storage, and all these overhead cost cant be associate directly with product
cost.

The various components of cost can be classified as shown in table below.

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 Figure 8: Relationship between elements of cost and components of cost. [5]

Prime_Cost = Direct_Material_Cost + Direct_Labor_Cost + Direct_Expenses

Factory_Cost=Prime_Cost + Factory_Expenses

Office_Cost=Factory_Cost + Administrative_Expenses

Total_Cost= Office_Cost + Selling_Expenses + Distribution_Expenses

If the profit of factory is added, in the total cost of the product it is called selling price.

6 Motivation
Estimating manufacturing cost at design stage is very important in todays market of intense
competition. For the designers if the product manufacturing cost can be estimated during the
design stage, they can modify a design to achieve proper functionality as a reasonable cost at
early stage. Early cost estimation also serves as a decision making tool for the designer when
a choice is to be made from range of alternatives. Quotation in the field casting is a highly
complicated task. The simple cause of this is that one must estimate the manufacturing time
and cost, with unknown tool construction and complexity. The major objective of this project
is to develop a framework for early cost estimation for casting product, which permits
calculation of realistic manufacturing cost and time in advance, based on the local design and
manufacturing environment. In the product development cycle it is necessary to identify the

17
factors which can be decided by designers in the initial stage and will influence the final
production cost. These identified factors can be used to link the design module with the cost
analysis so that designers can determine the production cost by modifying these factors.

7 Report Organization
In the first chapter, a brief overview of the major casting products is given. This chapter
talks about the major casting process and post casting probable machining process. In the
second chapter the significance of the cost estimation at product design stage is discussed
along with various factors (components) which contribute towards the cost. In the third
chapter all the major cost estimation methodologies briefly explained, and in fourth chapter
a compression is done among similar estimating methodologies.

CHAPTER 3

Cost Estimation Methods

The published literature on early cost estimation technologies covers wide variety of issues
ranging from casting cost estimation of standard components to cost analysis of highly
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customized assembled products. It also covers process cost optimization techniques to
specific methods for overhead cost.

A number of reports have classified cost estimation techniques using several different criteria.
Qian and Ben-Arieh [8] classified cost estimation methods into intuitive, analogical,
parametric and analytical method. Chan et al. [9] classified estimation methods into
traditional detailed breakdown, Simplified-breakdown, group technology-based, regression-
based and activity-based cost estimation methods. Abdalla and Shehab [10] classified into
intuitive, parametric, variant-based and generative cost estimation approach without defining
them clearly. Pinto et al. [11] classified into three categories: engineering approaches,
analogy-based and parametric. Many other papers had classified all these methodologies into
similar categories. [12]

8 Classification of cost estimation methods

Our classification of cost estimation methods is based on grouping the technology with
similar feature into various categories. The methodologies for cost estimation discussed in
different categories are distinct and reflect the nature of that category. Each group and
category is discussed in details, with reference to the published work. In this report cost
estimation methodologies are classified into two categories: qualitative and quantitative.

Figure 9: Classification of cost estimation methods

Overview of qualitative and quantitative estimation methods

Qualitative cost estimation methods are mainly based on comparison of a new product with
the products which are already manufactured. This comparison identifies the similarities in

19
new product and old products. The identified similarities help to use the past data into new
product and the need to obtain product cost from scratch is reduced.

In this case, the past design and manufacturing data or previous experience of an estimator
can provide useful help to generate reliable cost estimates for a new product that is similar to
a past design case. Sometimes this can be achieved by making use of the past design and
manufacturing knowledge in a system based on rules, decision trees. Historical design and
manufacturing data for products with known costs may also be used systematically to
obtain cost estimates for new products. For example regression analysis models and
neural-network approaches could provide an efficient way to predict costs for new products
by using historical cost data. In general qualitative techniques help obtain rough estimates
during the design conceptualization. These techniques can further be categorised into
intuitive and analogical techniques.

Quantitative techniques are based on a detailed analysis of a product design, its features, and
corresponding manufacturing processes instead of simply relying on the past data or
knowledge experience of a manufacturer. Therefore costs are calculated by using an
analytical function of certain variables representing different product parameters or the sum
of elementary units representing different resources consumed during a whole production
cycle of a given product. Although these techniques are known to provide more accurate
results their use is normally restricted to the final phases in the design cycle due to the
requirement of a detailed product design. Quantitative techniques can be further categorized
into parametric and analytical techniques.

9 Intuitive estimation methods

The intuitive cost estimation techniques are based on using the past experience. Domain
experts knowledge is systemetically used to generate cost estimates for parts and assemblies.
The knowledge may be stored in the form of rules, decision trees, and judgments at a specific
location. For example a database to help the end user improve the decision-making process
and prepare cost estimates for new products based on certain input information. Intuitive
estimation methods are further classified into three subcategories.

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Case-Based cost estimation method

Figure 10 : Flow diagram of the case-based approach for cost estimation [13]
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The estimators compare the new product design with the closest match among all previous
designs. This method is based on hypotheses that similar problems should have similar
solutions thus we can use the solution of pervious one for the similarly matching new one
[14]. This approach also known as case-based reasoning. Case-based cost estimation attempts
to make use of the information contained in previous design cases by adapting a past design
from a database that closely matches the attributes of a new design. This often requires
making necessary changes to parts and assemblies of previous design cases and incorporating
missing details to it. Above figure shows a flow diagram of the case-based approach with the
dotted lines representing the cost interfaces to the system.

The process starts by outlining a new products design specifications followed by retrieving a
closest design match from a design database. The system then tries to find the changed
assemblies and, subsequent changed parts in the assemblies. Changes are incorporated into
the design either by retrieving similar parts or similar assemblies from the design database or
by designing the new ones altogether. All the necessary changes are incorporated in a similar
way until the new design conforms to the outlined design specifications. The new design is
later stored in the design database. This technique allows the cost estimation for a new
product by combining the past results with those for the newly designed components and
assemblies, thereby greatly reducing the need to design from scratch. The approach is
therefore helpful in making good estimates at the conceptual design stage. Since the use of
the past cost data to generate new estimates greatly minimizes the estimation time. However,
the methodology is applicable only when similar past designs are available to incorporate the
relevant cost data during cost estimation for new products. A typical example can be seen in
the methodology presented by Rehman and Guenov [13] in which an attempt is made to
predict design features from incomplete design descriptions based on past designs and
production knowledge. In their work a system allows the retrieval of past design cases that
match the new problem description. The cost modeler detects necessary modifications in the
retrieved designs, and the cost data is updated accordingly using the adaptation rules stored
within the design models. The system is based on extracting geometrical features from
computer-aided design CAD models stored in a database and calculating the similarities with
the problem description of new products features. Chougule and Ravi [15] further used case
based reasoning method for casting process planning. They determine nearest neighbour
(similar case) using analytical hierarchy process (AHP), which involve grouping the design
attributes depending upon their similarity and comparing pair-wise.

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 Rule-based cost estimation system
These systems are based on process time and cost calculation of feasible processes from a set
of available ones for the manufacture of a part based on design and manufacturing
constraints. Such a system reflects these constraints in a respective rule class with the
information encapsulated in it by an expert in the area. A rule-based algorithm is an example
of one such approach that helps to establish design and manufacturing constraints. This
approach is shown diagrammatically in following figure. Based on a set of user constraints,
manufacturing processes are selected that are then used to calculate the product cost. The set
of constraints may need to be changed to obtain a different set of manufacturing processes to
obtain an acceptable product cost estimate. This methodology is helpful for cost optimization
based on process evaluation criteria. However, obtaining the optimized results can be very
time consuming, especially when there are a large number of processes to be evaluated.
Gayretli and Abdalla [16] developed a rule-based algorithm for the selection and optimization
of feasible processes to estimate process time and cost based on parts features. A detailed
description of part features with possible processes and constraints was given.

Figure 11: Cost estimation process model based on user constraints [12]

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Process times were calculated using a standard formula as

Form Feature Volume

ProcessTime=
Material Removal Rate

The proposed system allowed the selection of a combination of The process time is then used
to calculate lot time, which is based on a form feature quantity. The total process cost is
subsequently calculated as follows:

Total Process Cost=Lot Time Productive Hour Cost

The total cost is then calculated as follows:

Total Cost =Material Cost + [( Lot Time PHC )+ ToolCost +Setup Cost ]

The proposed system allowed the selection of a combination of feasible processes from the
possible ones, and hence, the calculation of process time and cost based on the user input
constraints e.g., maximum allowable cost and process time for a particular feature.

10 Analogical cost estimation techniques

These techniques employ similarity criteria based on historical cost data for products with
known cost, such as regression analysis models or back propagation methods.

Regression analysis models

These models make use of the historical cost data to establish a linear relationship between
the product costs for the past design cases and the values of certain selected variable so that
the relationship can be used to fore cast the cost of a new product. The regression analysis
uses product parameters as variable in cost functions. A graph of likely parameters as weight,
volume etc is plotted against the cost of the part. If the regression of the data has a sufficient
high correlation coefficient then the curve fit can be used to make future cost estimation.

Example: regression analysis method for tooling cost for metal pattern [17]

The following table contain list of 12 metal pattern manufactured in the industry. The details
of pattern in terms of weight, accuracy index and complexity index are given in table.

24
The complexity and accuracy data converted onto a scale of 0-100 with 20 being simple and
100 being very complex and accurate.

Sr Part Name Weight Complexity Accuracy Cost

. (Kg) Index Index (Rupees)
1 Cover 2 20 20 2,965
2 300 MM butterfly 17 40 40 9,180
3 125 Valve Body 19 40 40 10,600
4 Housing 24 60 40 28,000
5 Cover 60 80 40 32,000
6 Hammer 71 40 20 18,200
7 Cover Plate 100 20 60 10,000
8 Hammer 103 40 20 21,450
9 Ball Valve 115 60 40 32,000
10 Chain Link 115 60 60 30,000
11 Pump Casting 500 60 60 50,000
12 Head 570 80 60 258,000
Table 3: Metal (Aluminium) pattern Data [17]

The linear regression analysis of the parameters with the cost was conducted MS Excel 2007
[18] making use of data from [17] and results of which are shown in tables below.

Complexity
Weight Accuracy Index Cost
Index
Weight 1
Complexity
0.512308 1
Index
Accuracy
0.587575 0.401258 1
Index
Cost 0.803229 0.597796 0.435815 1
Table 4: Correlation matrix for metal pattern

Regression Statistics
0.881709
Multiple R 639
0.777411
R Square 888
Adjusted R 0.616836
Square 752
42749.46
Standard Error 563
Observations 12
Table 5: Summery, output of regression analysis

25
 Coefficients Standard Error t Stat P-value
Intercept 0 #N/A #N/A #N/A
Weight 287.6136487 80.42896 3.575996 0.005968
Complexity Index 69.7114481 619.1371 1.120449 0.29153
Accuracy Index -762.7738512 768.2667 -0.99285 0.346725
Table 6: Regression analysis coefficient for metal pattern

From the above we can see the weight has a high value of coefficient with cost as expected.
From the table we see that R square has a value of 0.777411888, which implies that 77.74%
(approx) of the variations in cost are explained by the model. From the above table we can
see that for the assumed liner relationship of the parameters, the accuracy coefficient has a
negative value, also the P-value for both complexity and accuracy is very high which implies
that those two parameters are not significant. The resulting equation of the analysis is given
below.

Cost =( 287.61Weight ) + (762.77Accurac y Index ) +(69.71Com p index)

As we are getting negative coefficient for accuracy index, we can apply regression analysis
on same set of data with complexity power X and accuracy index power Y (Where X,Y >1) to
increase significance of accuracy index. With value of X = 1.1, Y= 2.8 we got following new
equation for pattern cost

Cost =( 302.1Weight ) + ( 31.67Accurac y Index ) +(22.94Com p index)

The result of the regression analysis will be more accurate if more set of data is available.

Neural-Network Based Cost Estimation Method

This method also called Back-Propagation Neural-Network (BPNN) method. These models
use a neural network that can be trained to store knowledge to provide the answers to even
those questions which are not seen by them before. It means that such models are particularly
useful in uncertain conditions and highly adaptable to deal with nonlinearity issues as well.
The neural network is the most common of all network types and also suits better the nature
of the product cost estimation. Shtub and Zimerman [19] compared the cost results obtained
with the regression model and the neural-network model and observed the superiority of the
NN method in many ways.

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11 Parametric Cost Estimation Techniques
Parametric cost estimation models are developed by using the statistical methodologies and
expressing cost as a function of its constituent variables. This methodology is effective in
those situations where the parameters, sometimes known as cost drivers, could be easily
identified. Parametric models are generally used to quantify the unit cost of a given product.

For example Cavalieri [20] developed a parametric model for the estimating of unit
manufacturing costs of brake-disk using the weight of the raw disk, unit cost of raw material,
and the number of cores as parameters in their model, which is expressed as follows:

C rm TF
C=FC +(C CO N CO + )W
1SC

Where C is the unit cost of the disk brake, FC the fixed cost factor coefficient, C co the core
cost coefficient per kg for cast iron, Nco the number of cores, Crm the unit cost of raw material,
SC the scrap rate coefficient, TF cast-ironsteel conversion factor (coefficient), and W the
weight. A simple linear regression model using one of the cost drivers would not be effective
because of variances between the data. Many type of parametric estimation models were
developed in past.

12 Analytical Cost Estimation Techniques

This approach requires decomposing a product into elementary units, operations, and
activities that represent different resources consumed during the production cycle and
expressing the cost as a summation of all these components. These techniques can be further
classified into different categories, which are explained in detail below.

Operation-Based Approach
This model is generally used in the later design stages because of the type of information
required and is one of the earliest attempts to estimate manufacturing costs. The approach
allows the estimation of manufacturing cost as a summation of the costs associated with the
time of per-casting manufacturing operations, nonproductive time, and setup times. Several
techniques have been developed to select the alternative manufacturing operations that
optimize the machining cost. The cost model proposed by Jung [21] estimated the

27
manufacturing cost by considering three different times including setup time, operation time,
and nonoperation time. Formulation was provided. The total cost was given by:

T su
Manuf .Cost =( RO + R M ) [ ( )
Q
T ot +T no ]

where Ro is the operators rate, Rm the machine rate, Tsu the setup time, Q the batch size, T ot is
the operation time, and Tno the nonoperation time. The model could not be used to evaluate
design alternatives because of its availability only in the final stages of design cycle.

Breakdown Approach
This method estimates the total product cost by summing all the costs incurred during the
production cycle of a product, including material costs and overheads as well. The method
requires detailed information about the resources consumed to manufacture a product
including purchasing, processing, and maintenance details. Ravi and Chougule [17] also used
the breakdown approach for their hybrid cost estimation model.

Figure 12: Breakdown of total production cost

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 Tolerance-Based Cost Models.
The objective of these kinds of estimation models is to estimate product cost considering
design tolerances of a product as a function of the product cost. Singh [22] proposed a model
for the concurrent design of product and processes considering the criteria of minimum cost,
maximum quality, and minimum manufacturing lead time. Three models were presented to
jointly design the products and processes. They are the unit cost of production model, the
quality model, and the lead-time model. The unit cost model was expressed as follows:

X0(d, j) = Ki(d, j)[ Xi + f( j)] - Ks(d, j)Xs

Where Ki and Ks are technology coefficients that can be calculated from the following
equations:

Ki = 1/ [1- SC(d, j)]

Ks = SC(d, j) / [ 1- SC(d, j)]

SC is the scrap rate given by the following equation:

SC(d, j) = [- d/(j)] + 1- [d/ (j)]

where j is the jth manufacturing process selected for producing a product, Xo(d, j) the unit cost
with tolerance d, Xi the unit raw material cost, f(j) the unit processing cost for j th process, Xs
the unit salvage value, Ki the technology coefficient input, K s the technology coefficient
(scrap), SC(d,j) the scrap rate, j the standard deviation, and (x) the cumulative distribution
function of probability distribution with the mean equal to 0 and the standard deviation equal
to 1. The modeling methodology was based on obtaining the optimal tolerances and, hence,
setting up the acceptance regions for the design variables meeting certain criteria.

Feature-Based Cost Estimation

A feature is a subset of geometry (cylinder, slot, step, hole, etc.) on an engineering part,
which has a special design or manufacturing characteristic. During the feature-based
modeling the work piece is divided into simply individual building blocks. These geometric
features are use as the cost drivers. Chen and Liu [23] used the feature recognition method to
evaluate a new product design as they assumes that a product is a set of features and
combinations of features. The main problem of the development is the description of the
work piece. There are several possibilities of part representation, like CAD models, GT code,
29
Mathematical description of surfaces etc, but the constraints of methods and the difficulties of
implementation the feature-based part representation is suggested by Miko and Szantai [24].
They studied the use of artificial intelligence (AI) for this method and they selected three
types of AI methods for FB estimation (i) Rule-based reasoning (ii) Case base reasoning (iii)
Artificial neural networks. On the basis of their examination they established the limits of
these methods.

Rule-based system Case-based system Neural Network

Small database Robust work Hidden connection recognition
Strength
Settle knowledge base Simple algorithm
Complicate algorithms
Weakness Great data base Learning patterns needed
Hard to supplement
Table 7: Limits of selected AI methods by Miko and Szantai [24]

An example of Feature based framework

Lin and Ou-Yang [25] proposed a system framework using feature based approach. For the
proposed framework a computer-aided process-planning system can analyze the geometric
information of the form features and generate the required manufacturing processes based on
the information stored in a knowledge-based system.

There are mainly three modules in above shown framework.

The CAD module

The CAD module supports the feature-based part construction and modification functions for
the user to perform the design task. The form feature library can store frequently used
features to support the design task. The part database store B-rep data, features, and value of
parameters used in defining individual features, and precision requirement for each feature.

30
 Figure 13 : Framework of the cost estimation system proposed by Lin and Ou-Yan [25]

The Reference module

The Reference module store different type of data. The machining specification files save
the related data about the available machines in the company, also the kind of operation that
can be performed by each machine, the operation cost for each piece of equipment, and
surface finish ranges for individual machines. The feature manufacturing process library
stores the required manufacturing process in order to produce certain features of different
surface roughness. The feature specification file save data about individual feature of a part
such as volume and defined parameters. The manufacturing process data include the
sequence of the process as well as the required machining and duration of each process. The
tooling cost file contains the estimated cost for each part and its features.

The Analyzing module

The Analyzing module builds upon two sub modules. The feature geometry analysis module
will directly or indirectly extract feature-based part data from the database of the CAD
System. The retrieved data includes the types of features, the values of the parameters used to
define each feature, specified surface finish range of each feature, surface area and the
volume of each feature can also be computed based on the retrieved data, These data will be
stored in the feature specification file of the reference module. There are three functions in

31
the cost analysis sub module. One analyses the manufacturability of each feature. Second
function is to estimate the required manufacturing time of each feature. The estimated
machining time with the unit time cost of the assigned machines will be used to compute the
manufacturing cost of the examined part in the manufacturing cost computation function. The
computation results will be stored in the manufacturing cost file for user reference.

Activity Based Cost (ABC) Estimation Method

Activity based cost estimation follows the idea that designing, manufacturing and testing the
products requires many activities to be performed in a company. Performing these activities
consume resources. Using resources causes costs to be incurred. So all the activities associate
with production of a product is identified and then costs are assigned to these activities based
on the resources they require. This method is a good option as an alternative to traditional
cost estimation method because it gives more accurate product manufacturing cost estimates
[26]. ABC is more effective in terms of allocation of the overhead costs among various
products. The main advantage of ABC is that it is capable of providing fairly accurate cost
estimation for making wide range of decisions. Also it provides feedback about activities for
continuous improvement. In case of direct-to-total cost ratio of the company is high, ABC
may not suitable as lot of efforts and time required to be put for estimating cost using this
technique. Where the ratio is low, the ABC can be use profitably [17]. With help of the
process models and the activity based cost calculations, product designers can estimates the
effects of different design options on final product costs. The accuracy of activity based cost
estimation model is depended on how reliable the activity time estimates for a new product
were.

Example: a company manufacturing parts in two categories: heavy parts and small parts. It
uses carts for internal movements of these parts from one job shop to another. The company
spend total 20,000 rupees over repair, maintenance and depreciation of carts over a period,
and 1000 unit of each type of part are manufactured in that period. Since both parts are being
manufacture in equal quantity, the cost is distributed equally in traditional cost accounting
(TCA) system. While traditional accounts looks for apparent cause and effect relationship,
ABC goes much deeper and finds out who is the real beneficiary of cost incurred. Each small
part required 5 internal movements while large parts required 10 internal movements.

32
Further, a standard cart could carry 10 small parts or 20 large parts. With this information, we
can work out overall movements of carts and distribute the cost accordingly as shown below:

Heavy Parts Small Parts Total

TCA
No of parts manufactured 1000 1000 2000
Cost allocation (A) 10,000 10,000 20,000

ABC
No of parts manufactured 1000 1000 2000
Moment per part 10 5 Unit cart moment cost
Total parts moments 10,000 5,000 = 20,000/1250
Cart capacity 10 20 = 16
No of carts moments 1000 250 1250
Cost allocation (B) 16,000 4000 20,000

(A B) 6000 -6000
Table 8 : Overhead distribution due to ABC and TCA

From above it can be observed that under TCA, heavy parts were being under-charged which
would certainly reduce their profitability.

33
CHAPTER 4

Concluding Remarks
Metal casting process consists of a number of different processes that form a manufacturing
chain in making a finished part. There are multiple steps involved in a manufacturing metal
casting product. Multiples manufacturing steps often imply difficulty in establishing accurate
and general estimation method. There are number of different type of metal casting processes,
in addition to that unique nature of each part design combined with its shape complexity
make the task of accurate cost calculation even more difficult. When we consider the fact
each foundry has different and unique manufacturing conditions and production limitations as
well as different in-house expertise then it lead to conclusion that only approximate model or
semi-empirical model of the metal casting process cost estimation can be developed.

The Case-based cost estimation system has drawback of having dependency on past cases
where rules based system is time consuming but it can provide optimized results. The
regression analysis is simple but we can't use this model where one of the cost drivers has
large variances between the data and there is a limitation of liner relationship between cost
drivers and cost. With the help of neural network method we can deal with the non-linear and
new (uncertain) problems and can recognise hidden connection with final cost. Parametric
cost estimation method is can't be used when cost drivers can't be identified, but it use cost
drivers more effectively than regression analysis method. Operation-based cost model is time
consuming and detail design and process planning data is required but at same time using this
method we can find out alternative process plan to get cost-effective solution. Break-down
approach is easier to apply but it also demands for details information resources being
consume. Feature-based cost estimation method has limitation in identification of features
where features are complex and small in size. ABC method is good at distributing overhead
cost, but where direct-cost to total cost ratios is high, i.e. less overhead cost it's not effective
and it require lead-time in early design stage. Estimation methods have limitation of inter-
changeability as most of methods are based on data.

34
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